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Strategies & Market Trends : BAK - Investing

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To: Flipper2058 who wrote (2806)	5/29/2012 9:08:29 AM
From: kollmhn	Read Replies (2) of 3249

Flipper- re:GDL B pfd Just tossing around a few thoughts and I'm curious how you come out on this: The B has a 3% divvie. Given the language in the prospectus and assuming little change in interest rates by next Feb, the reset will once again be a 3% divvie rate. Under those circumstances Gabelli can expect to have a lot of stock put back to them UNLESS they've been able to justify a refi of their other callable pfds. Could Gabelli sell a new 6 year pfd issue at 3%, putable in two years, that will also reset (at 3%?) in two years for the remaining three years? If they have not re-fi'd the GAB F 6.20s by then, why wouldn't one prefer the Fs to a new B for an extra 3% per year? Granted, the Fs have no upside (being callable at $25, now) and all downside but rates need to rise a fair bit before the downside risk kicks in. So, given that Gabelli has to keep a preferred outstanding and given that some Bs will get put back to them, I'm guessing they do a rights offering into something more attractive. Maybe it's no more difficult than perpetual pfds trade at 5.5-6% while 2-6 years pfds trade at 3%. It would be nice to see a preferred yield matrix.

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